If an operator of an online casino or sportsbook wants to do everything legally and “by the book” then they must get licensed.
Licensing allows casinos to operate legally and under regulation from a regulatory body of the jurisdiction they are registered at. While regulations place many burdens on operators, in the end, the benefits of being legal and legit far outweigh both the costs and the legal limitations imposed.
Here at Sigma, in this comprehensive guide on online casino licenses, we will go over the whys and hows of getting licenses. And also take a look at some of the most popular gambling license jurisdictions to help you make you decision.
What Are Online Gambling Licenses?
Simply put, an online gambling license is a legal document conferring the right onto a company to operate a gambling business in a given territory.
Just as land-based casinos must be regulated, so do their online counterparts.
In order for an operator to offer games of chance such as video slots, table games, or sports betting legally, they must have a license that covers the territories they want to offer the games in.
Getting one, however, is usually no easy feat. Not only do they cost money (depending on jurisdiction, the licensing costs may represent a significant barrier to entry on the market) but they also create an obligation for the company to follow regulations.
The exact nature of the regulations depends on the given jurisdiction. Some, like Curacao, are known for being less stringent. While for instance the United Kingdom Gambling Commission is consider especially tough.
What’s important to note is that the early days of unlicensed and “wild west” online gambling are largely over. More and more countries want to bring this form of gambling into the legal mainstream and have begun to crack down on anyone who operates illegally. Therefore, those who do so are not only risking steep fines but even potential jail time.
In general, the role of the licensing authority is to make sure that all the gambling, including online, is above board and safe for the consumers.
This is why those who want to open an online casino must have a license. The hard part of this decision is actually figuring out where to pursue getting a license. Many different jurisdictions offer them, all of them have their own pros and cons.
But, with this guide in hand, you will be able to figure out most of these questions and know what to expect as you set out on the journey to get your budding online iGaming empire up, running, and most importantly — legal.
Where And Why Should Casinos Get Licensed?
When considering a license (and operators definitely should), there are a lot of things to take into account. But the most important thing to remember is that players today expect an online casino to be operating under laws and regulations.
Most of the sites that review casinos make a note of the jurisdiction. Players are sensitive to this info, as they do not want to deposit their money into a venue that could be deemed unsafe. And as the events in the iGaming industry in 2021 show, more and more countries are moving to regulate all forms of online gambling. This means that to be a viable option for players today, operators must be licensed.
And that is just on the perception side of things. The main reason why operators pursue licenses is to protect themselves from legal liabilities and to be able to operate normally as a business.
That last part is extremely important. These days, players expect to be able to deposit and withdraw monies using many different payment providers and to be able to take a punt on a large catalogue of games.
And here’s the thing. You won’t be able to offer many payment options and many games if you’re not licensed. It’s simple. Respectable companies want to work with other respectable companies. Your fly-by-night operation simply won’t attract such game providers as NetEnt or Microgaming, sorry.
In order to be able to collaborate with the best providers, whether it’s in payment, games, or the casino platform itself, you will need to be licensed and operating legally. Some who do not do so run pirated software on their sites, but this opens additional legal liability as those companies can sue for copyright and intellectual rights infringement.
Since we settled the question of why, it’s time to address the where of it all. We will go over the different jurisdictions in-depth a bit later in this guide, but for now let us say this choice primarily depends on where your company is based and which market you want to go after.
While all of the jurisdictions have their own rules and requirements, there are things they have in common in broad strokes.
What are called “fit and proper persons” will have to occupy ownership and senior positions, there are tests for this. The random number generators (RNGs) in the software will have to be regularly tested and validated. Some may even ask you to publish a full RTP (return to player) list for each and every game your offer.
Some clientele may be barred from playing with you and you may need to establish limits on deposits.
These are just some of the requirements, and this is by no means an exhaustive list. When considering where to get licensed, it is very important to go through the full legal requirement list. Agencies exist to help companies through this process, due to the volume of work involved.
How Online Casinos Apply for Gaming Licenses?
Each licensing authority will have its own process of application. But there are some things that they have in common and that prospective casino operators can expect as parts of the process no matter where they apply.
In general, you can expect to pay various fees (one-time and/or yearly, more on those later in this guide), deal with a considerable load of paperwork and also waiting. For a couple of months at least.
Common requirements include things like background checks, business plan, proof of funds, and software and compliance checks.
Depending on jurisdiction it may be necessary to also incorporate in the jurisdiction and to house servers in the same location too.
A lot of the times, the authorities also enforce standards on platform providers so it can increase the chances of a successful application to cooperate with providers who are already licensed and reputable.
Speaking frankly, getting licensed is no cake-walk. There are many checks, many demands and requirements. Criminal records will be checked as well as passports, bank references, information on target markets, measures to prevent minors from gambling…
Anti-money laundering and know your customer procedures are another big part of what is asked from prospective iGaming operators.
To keep track of all of this and to avoid wasting time and funds, many companies seeking online gaming licenses employ the services of legal firms and consultancies that specialize in this area of corporate law.
Note also that gambling authorities do not operate in a vacuum. They are able and willing to use enquiries with other national and international regulatory bodies to fully check your probity and get the necessary info about your background and history. Therefore, it could be argued that the best way to get through the licensing process is to be as forthcoming and transparent as possible.
This goes even for those who do have blemishes in their history, as the investigation will most likely uncover it.
As to how to actually begin the process, applications can be made through a licensing agent or independently. Sometimes, it will even be possible to apply online.
What all online casinos or sports betting sites need to know is that while most will be operating in many countries, the legislation of the country where it is registered will always take precedence over any international laws. That is yet another thing to keep in mind.
A number of gambling jurisdictions exist now, and most casinos tend to choose one of the most popular ones, such as Malta, Curacao, or Gibraltar. The choice of jurisdiction is possibly the most important step in the process as it will dictate the rest of it.
How Do Online Casinos Choose an Online Gambling License?
So, how is that done, then?
Out of so many different options, how do companies seeking to operate online iGaming sites decide where to incorporate and which license to seek?
To answer this question, companies need to think about their needs and business possibilities. This is what will guide the decision. Any type of gambling will require a license and businesses have to get one before they go live.
Before they set out on the difficult and demanding trek of licensing, online casinos take into account the requirements each jurisdiction imposes, the costs associated in the fees, and the taxation policy. Many choose to speed this process up by hiring outside help such as lawyers.
Different jurisdictions also have different reputations. Some are seen as more lenient while some are seen as very heavy on the rules and limitations. As an example, the United Kingdom Gambling Commission has recently decided they will start regulating how fast a single round in a video slot game can be. In Sweden, the regulatory body decided to ban the offering of bonuses.
There are quite a lot of factors to consider when choosing a license, and it’s of the highest importance to get it right.
The Overview Of The Most Popular Gambling License Jurisdictions
In this section of our guide, we’ll take a look at some of the most popular and most commonly selected online gambling jurisdictions. Each of these have their own pros and cons, opening certain opportunities while closing some others.
They also vary in requirements and the costs associated, so those looking to get their online casino up and running need to have a good hard think about what might work best for their specific needs.
Malta Gambling Authority
Malta has for many years been the iGaming hub of Europe. That’s for a good reason, as their license is considered very reputable and offers access to the lucrative European market.
The Malta Gaming Authority (MGA) is the body that carries out the licensing process and confers the license to an operator. They are also the ones issuing regulations and checking compliance.
MGA offers four classes of licenses. The first type gives the right to organize games of chance where the result is determined by an RNG. This is the license that you want if your online casino offers video slots and table games. The other licenses offer the ability to organize games based on event outcomes (i.e. sports betting), poker, and fantasy sports.
In 2018, the body streamlined some of the taxation system, removed the need for current holders to apply for separate licenses, and waived the monthly compliance contribution for the first 12 months of casino’s operation.
Getting licensed in Malta, however, is a long process. Prospective operators go through at least five stages which including several compliance audits. It takes 3 to 4 weeks for the application to be considered, followed by a temporary license of six months. After that, based on extensive checks, a five year license is given.
The process is definitely involved: a fit and proper check, business planning check to ensure the viability of the business plan, financial reserves check, system review. But with so many online casinos and sports betting sites choosing this license, it’s clear that it is worth it.
It gives access to the European market and players place a high trust in it.
United Kingdom Gambling Commission
Then there is the UKGC. This is the regulating body that oversees gambling in the United Kingdom and offers a host of different licenses based on what a company is doing. These include five types of remote betting ones (as an example, accepting sports betting on real events and on virtual events requires the possession of two different licenses) as well as a range of intermediately and industry licenses.
This is one of the drawbacks of the UKGC, as operators who later want to branch out into other aspects of iGaming will need to apply for a separate license for each.
In addition, the UKGC has some of the longest approval processes which can last up to 16 weeks, and in recent years, the regulatory body has begun tightening the leash on what operators in the country are allowed to do.
So, why get licensed by the UKGC at all? The UK is one of the largest contributors to the international gambling industry, generating a gross gambling yield of £2 billion between October 2011 and September 2012. There’s your answer.
Before 2014, the UK had a more relaxed attitude to remote gambling and operators from so-called “whitelisted territories” (such as Malta and Gibraltar) were able to both accept bets from Britons and to advertise in the country. Since 2014, changes in regulation mean that anyone wanting to access the UK market and advertise in it must be licensed by the UKGC.
So, despite UK regulations being onerous with a trend of increasing regulatory pressure, online casinos still get licensed here due to the lucrativeness of the UK iGaming market.
Curacao is a small island in the Caribbeans, that has a large presence in the online iGaming industry. This is in large part due to the ease and low costs of gaining a license.
How it works is that there are master licenses and sub-licenses. New operators apply for a sub-license at one of the four master license holders (they have been fixed since 1996). Master licenses are renewed every five years, and sub licenses are valid for as long as the master licenses are.
A main advantage of this system that online casinos need only one licenses for the entire iGaming vertical. This is in contrast to jurisdictions like the UK one where separate licenses need to be obtained to offer different kinds of gambling.
Where the Curacao license really shines is in how cheap it is. While each of the four master license holders has its own rules and fees, it is in the neighborhood of $5,000 annually. There is a onetime application fee (around $2,000) and a couple of other smaller ones.
In addition, Curacao has a 0% corporate income tax and a 2% net gains tax. Getting a license is fast and takes as little as six weeks.
There are a couple of significant drawbacks, however. Casinos licensed in Curacao cannot accept players from the USA, France, the Netherlands, and Curacao itself.
Overall, however, due to its simplicity and quickness, Curacao is an excellent choice for many first-time operators. Of course, such operators can always choose to be licensed somewhere else later.
Gibraltar is another of those jurisdictions that is very attractive due to low taxes — just 1% of revenue and capped at £425,000.
But Gibraltar is also quite possibly the most exclusive jurisdiction there is. Online casino owners need to prove financial solvency, provide a business plan and be ready to perform all transactions solely through banks based in Gibraltar.
This jurisdiction also has some of the most stringent regulations and is the golden standard of trustworthiness and reliability.
The license fee is paid in one lump sum of £100,000. But that’s far from the only thing you’d need to pony up to get a license here.
Gibraltar is selective, preferring to give licenses only to already established operators that already hold reliable licenses.
As it states on the regulator’s website, the authority only considers “blue chip companies with a proven track record in gambling.”
And perhaps the most important thing written on that same website — “Licenses are generally difficult to obtain.” So, there you go. This is an option for the already established operators who want to pay less taxes. If you’re someone looking to get start, you’ll have to look elsewhere.
For a long time, gambling in the country was a state monopoly. But recent changes have seen the market open up.
Spelinspektionen is the body that decides who gets a license and who does not.
Sweden, being a new market, is also quite stringent. The focus of the Swedish regulators is player protection and reduction of gambling addiction. It is also a very reactive body. In 2020, during the Covid-19 pandemic Sweden temporary responsible gambling measures such as a SEK 5,000 limit on deposits and a bonus limit of SEK 100.
Spelinspektionen may be seen as a very restrictive jurisdiction, but it also represents an opportunity for iGaming companies as the market gets liberalized.
USA and other countries
In many countries, there are own licences, and in USA, Canada and Germany, there are licences per state – that means, that even you would have a licence to offer games in New York, you cannot offer them in Arkansas…. and the same goes in Canada and Germany. And the licences are different in every country, and in Europe, especially in EU, every country except Finland, has their own obtainable licence. The are 2 special cases in Europe: Norway and Finland, that still are relying on theirs tate owned monopoly.
How Much Do Online Casino Licenses Cost?
This is a tricky question as different jurisdictions charge differently for applications and may have other additional fees. Another important thing to consider is the tax rate.
Prices can be quite cheap, such as in the case of Curacao. Or alternatively, expensive such as in Gibraltar. Of course, Gibraltar offsets this high upfront license cost with a very favorable corporate gains tax rate.
In Malta, which remains the most popular way to get into the European iGaming market, the application fee is €5,000 and the annual license fee is fixed at €25,000. New tax rules since 2018, will see online casinos with the B2C Type 1 license (that’s the one that lets you offer video slots) pay annual taxes on a progressive scale: of 1.25% if the profits do not exceed €3 million, 1% for profits up to €4.5 million and so on.
If a casino makes up to €10 million it will only pay 0.55% in taxes. So for those companies that are very successful, Malta is clearly an excellent choice.
In general, depending on jurisdiction, the fees will be different. So anyone looking to get one of these licenses will have to weigh the costs. In Sweden for instance, casinos can expect to end up with licensing costs of between €229,950 and €257,450 based on the number of founders (this total includes things such as local servers and management fees).
Online Gambling License FAQs
What is an Offshore Casino License?
An offshore gaming license simply means that the provider works remotely from their home country but their operation takes place without locally-imposed restrictions. A very large number of online casinos today have offshore gaming licenses that enable them to work from one country while serving gamblers in many different territories where their license is accepted.
Why Should I Get a Gambling License For My Casino?
As online iGaming has become more and more widespread, governments have started regulating it. At the same time, players want to play at casinos that are fair and legitimate. Therefore, getting a license is essential to being able to be a proper player on the iGaming market. Not to mention that payment processors, banks, and software suppliers will only work with regulated casinos. This essentially means that operating properly as an online iGaming venue is not possible without a license from a competent gaming authority.
How Do I Obtain a Gambling License?
The first step in obtaining a gambling license is figuring out which markets your casino wants to serve. After that you will look into what jurisdictions can give you a license that will enable you to do business. There will probably be more than one, so things like license fees, tax rates, and more will factor into your decision. Given the complexity of this task, many prospective casino owners seek out help from legal firms to complete this process.
Original source: https://sigma.world/news/online-casino-licenses/